PROBLEM 11-9

(a) Carrying value of asset: $10,000,000 – $2,500,000* = $7,500,000.

*($10,000,000 ÷ 8) X 2

Recoverable amount ($5,600,000) < Carrying value ($7,500,000)

Impairment entry:
Loss on Impairment .............................................. 1,900,000*
Accumulated Depreciation—
Equipment................................................. 1,900,000
*$7,500,000 – $5,600,000

(b) Depreciation Expense .......................................... 1,400,000**

Accumulated Depreciation—
Equipment................................................. 1,400,000
**($5,600,000 ÷ 4)

Accumulated Depreciation—Equipment........ 700,000

Recovery of Impairment Loss................. 700,000
$4,900,000 – ($5,600,000 –
$1,400,000)

(c) No depreciation is recorded on impaired assets to be disposed of.

Recovery of impairment losses are recorded.

12/31/10 Loss on Impairment.................................... 1,900,000

Accumulated Depreciation—
Equipment ....................................... 1,900,000

12/31/11 Loss on Impairment.................................... 700,000

Accumulated Depreciation—
Equipment ($5,600,000 –
$4,900,000).................................... 700,000

11-56 Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only)
 PROBLEM 11-10

Part I
(a) Calculation of the machine’s value-in-use at the end of 2010

Future Cash Present Value Discounted

Year Flows Factor Cash Flow
2011 $22,165 0.86957 $ 19,274
2012 21,450 0.75614 16,219
2013 20,550 0.65752 13,512
2014 24,725 0.57175 14,137
2015 25,325 0.49718 12,591
2016 24,825 0.43233 10,733
2017 24,123 0.37594 9,069
2018 25,533 0.32690 8,347
2019 24,234 0.28426 6,889
2020 22,850 0.24719 5,648
Value in use $116,419

The calculation of the impairment loss at the end of 2010 is as follows.

Machine
Carrying amount before impairment loss .......... $150,000
Recoverable amount (value-in-use) ..................... (116,419)
Impairment loss .......................................................... $ 33,581

(b) December 31, 2010

Loss on Impairment .................................................. 33,581

Accumulated Depreciation—Machine ....... 33,581

Copyright © 2011 John Wiley & Sons, Inc. Kieso, IFRS, 1/e, Solutions Manual (For Instructor Use Only) 11-57